Ferrous Scrap Prices Jump in September

Ferrous scrap prices exceeded even the bullish expectations heading into September as the market settled up $20-35/GT on prime scrap and up $30-55/GT on obsolescent grades, depending on the region of the country. Sources expect prices to move still higher in October, lending support to higher finished steel prices.

Demand from U.S. mills picked up at the same time as the scrap supply was shrinking due to export strength and lower flows into the dealers’ yards, explained one scrap executive. “The mills seemed to think they could dictate prices and dropped them to unreasonable levels in June and July and attempted it in August, even in the face of heated export markets on both coasts. How long did they think this strategy would work before things got out of hand as they seem to be currently?”

Reported a dealer in the Northeast, the price for shredded scrap moved higher by $30-50 per ton in September, depending on the region and starting price level. Primes moved higher by $30-35 per ton as that grade generally was in better supply than the obsoletes. “Obsolete scrap supply is challenged by ongoing export demand pulling scrap toward the coasts, but more so by changing peddler and demolition project flows,” he said. “Customer counts at the local yards are well below pre-COVID levels, and it’s hard to see that changing soon. There are fewer demolition projects as well. In the meantime, the weaker U.S. dollar is helping to push export pricing higher. The latest sale price indication for Turkish 80/20 is over $300/MT CIF.”  

The Midwest did make up part of the disparity in prices resulting from the August market, but demand in that region was still not strong enough to pull scrap from the East Coast. “We may have to wait until October or November for those mills to step up their scrap buying and see the pricing differences close the gap to more normal levels,” he said.

“We continue to anticipate very tight obsolete scrap supply, despite rising prices, and improving prime scrap supply,” he added. “Some of the recent price increases are successfully pulling more car hulks off the sidelines, but not enough to satisfy demand or make up for the lack of other shreddables to process. Mill demand is coming back in the U.S. to some degree, but it’s obviously not where it was before last March. Heading into the fall, it’s hard to see prices declining from current levels. I expect the market to move higher again in October.” 

Another dealer in the East puts the September price for shred at $280-295, bush at $295-310, HMS at $240-260 and P/S at $260-285 in the Midwest/Ohio Valley. Large pricing discrepancies between different regions of the country have begun to level out. As a result, the Midwest/Ohio valley saw increases of $40-55/GT while the East and South markets went up “only” $20-30/GT. “Excess scrap has been consumed and/or sold into export, combined with an overall restocking period for big EAFs, providing tailwinds for strong pricing through October,” he said.

The scrap market was indeed stronger than anticipated in September, agreed CRU Senior Analyst Ryan McKinley. “There is a lot of demand returning to the market and scale prices have been somewhat low, which has kept supply tight. Mills are having to pay higher prices to get more obsolete supply back in the pipeline, as much of it has been diverted to the strong export market, while elevated pig iron prices keep that from being a cost-competitive alternative. In fact, some U.S. companies are scouring Europe to find and secure prime grade scrap supply.”

Looking ahead, he added: “There aren’t many signs pointing to a weaker October. The question is how much material comes to the market as a result of price increases in September. We expect Turkish scrap demand to be stable and U.S. steel prices to rise in the coming months. China shows no real sign of stepping out of the pig iron market, so that likely will not be a great option for U.S. buyers either.”

Pig Iron Market

Domestic mills have declined to buy enough pig iron, as prices are inflated by Chinese demand. They could have bought enough two months ago at $335-340/MT CFR, but decided to wait. Last week it was reported U.S. mills bought two 50,000/MT cargoes from Ukraine at $360/MT CFR, reported one source. “They used as much prime scrap as possible, but now there’s not enough to cover every mills’ needs. The pig iron cargoes will not arrive at U.S. ports until late November or December. There are reports of mills not being able to melt pig iron now due to low stocks. They will need more, and the next round of buying will be much higher. This leaves a lot of room for prime grades to rise. Consequently, the cost to make flat roll in EAFs will increase.”